Chinese industrial firms continued their upward trajectory in profits for the second consecutive month in September, indicating a stabilizing economy.

These gains were bolstered by a surprising 17.2% increase in August and stronger-than-expected industrial and consumption activity throughout September.

Data from the National Bureau of Statistics revealed that profits for the first nine months of the year declined by 9% compared to the previous year. However, this was a significant improvement from the 11.7 % drop in the first eight months.

NBS statistician Yu Weining noted that industrial profits saw a quarterly recovery, shifting from declines in the previous two quarters to a 7.7% growth in the July-September period.

Analyst Zhou Maohua from China Everbright Bank attributed the September numbers to an overall improvement in domestic industrial operations and the ongoing recovery in market demand while noting that the slowdown in year-on-year growth was due to a high base from the previous year.

The drop in producer prices in the previous month indicated that some industrial firms were still cutting prices to boost sales, which had a dampening effect on overall industrial revenues and profits, as Zhou pointed out. 

Nevertheless, he expects the improvement in industrial profits to continue in the coming months, partly due to the delayed impact of domestic macroeconomic stimulus efforts.

While the Chinese economy has shown signs of stabilization, challenges remain, especially in the troubled property sector, which continues to weigh on the overall economy and corporate earnings. 

The central bank governor, Pan Gongsheng, has pledged to support economic recovery by expanding domestic demand and mitigating financial risks.

Breaking down the data from the National Bureau of Statistics, state-owned firms saw an 11.5% earnings decline in the first nine months, foreign firms recorded a 10.5% drop, and private-sector companies reported a 3.2% slide.

These industrial profit figures encompass firms with annual revenues of at least ¥20 million ($2.73 million) from their primary operations.